Balancing Act: Founders CFO weighs growth with risk management

Andy Winkel is doing somewhat of a balancing act at Founders Brewing Co. of Grand Rapids.

For a company averaging more than 60 percent annual growth, balancing the needs of that growth while managing risk is a continuous struggle.

Winkel is part of a growing group of former board members that Founders has tapped for operational roles within the expanding brewery. He first came into the Founders fold as an adviser when co-founders Dave Engbers and Mike Stevens were looking to get out of the lease on their original brewery and taproom on North Monroe Avenue in the mid-2000s.

The production space was too small to support growth, but Engbers and Stevens had an additional problem — years of operating in the red.

“Capital markets were very tough at the time and the track record of the business was not the best from a banking perspective. They were making great beer and had a great following, but they weren’t bankable,” said Winkel, who was selected as the MiBiz CFO of the Year in the middle market category.

At the time, Winkel was leading Locus Development with cofounder John Green, who is now Founders’ President, but he helped craft the agreement that gave Founders access to capital for the microbrewery’s growth plans. A real estate entity was formed in late 2006 that would own and finance the real estate and equipment and lease it back to Founders. It primed the pump for the brewery’s explosive growth — affording Founders the ability to buy out Founders RE and bring all the assets back under the Founders name in 2010.

Founders was in the midst of the move just as the economy tanked and credit markets seized. The company was just beginning its rapid growth that provided it more opportunities to expand and pursue additional markets. At the same time, Engbers and Stevens had been building strength on their board, pulling Green and Winkel into the organization as advisers. During that time, Founders looked to another round of expansion, and in 2010 the cofounders tapped Green and Winkel to help build the business in more hands-on roles.

“Through that process (in 2007), I got to know the business very well,” Winkel explained. “I give the leadership here, Mike and Dave, the credit for this growth. They allow people to be creative, but (they) are also very smart businessmen.”

While much of Winkel’s two-year tenure at Founders has focused on implementing the tools to balance the competing interests of supporting growth and managing risk, he is also keenly aware that he must balance those controls that keep the organization healthy with the need to experiment on the production side of the business.

“We are very careful to not let our systems or processes stifle the creative process that allows the company to make the great beer it does,” Winkel said. “We can’t be in a situation where we have a huge facility and no beer to brew in it.

We analyze and analyze the data points to ensure we have the capital needed and that we find the most efficient way to employ it.”

Mike Drajka of SourcIT Technologies described Winkel as a “well-rounded” CFO in nominating him for the award.

“Andy truly cares about the company’s financials, people and processes without hindering the quality product they produce,” Drajka said.

From implementing Founders’ first ERP system to developing the tools to take the input from its sales force in the field and convert it into usable data, Winkel has helped build the systems that keep eyes on the ever-changing markets.

When lead times to purchase new equipment and implement it can stretch 16 months or more, the company can’t afford to miss a major shift in the buying habits of wholesalers, retailers and craft beer fans.

“[The sales team] has to be our eyes and ears on the street with our end customers, wholesalers, bars, and convenience store owners. They give us a better idea of what drives [purchase] decisions,” he said. “Within 18 months, we can bring capacity online that can produce 310,000 barrels annually. What happens when we get orders for 400,000 barrels?”

At the same time, the rapid growth has shortened the learning curve and challenged long-held assumptions: Decisions that 36 months ago would have made sense may no longer be the most prudent. Take the decision of whether or not Founders should lease or own its own keg fleet, the thousands of kegs that bring the company’s beer to market. Three years ago, leasing was the best option, whereas today the best option was to own, and that came at a cost of $6 million.

Founders’ path forward is to grow within markets in the 32 states it currently operates in and foreign markets.

“Over the next 12 months, we’re going to let organic growth be the driver of that [strategy],” Winkel explained, “We don’t want to be forcing product down people’s throats.”

The fact that Winkel isn’t a “beer guy” has meant a steep learning curve and also opportunities for the business. The path has been bittersweet, as coming to Founders meant the end of his work with Locus.

“I never thought that I’d be in the beer industry,” he said. “I bring an outside perspective. I’m glad I didn’t grow up in the beer industry. I can ask questions where I’ll get more information to come out than someone else — and we can challenge some assumptions.”

Andy Winkel

Organization: Founders Brewing Co.

Annual sales: $60 million

The best part of operating in West Michigan: “West Michigan is big enough where you can find very smart people in Grand Rapids to capture opportunity. They’re out there. It is not too big that you get lost in the shuffle.”

Mission critical: Keeping a constant eye on the sales within markets Founders operates is key to staying abreast of changing dynamics to manage cash flow. Winkel combines industry data, internal sales information, and insights from the Founders sales team to get a sense of the product mix that dominates particular markets. “Combining all those data sources and looking at the whole, then having the ability to deep dive is key.”

Academic degree: University of Michigan

Personal: Married with three children

--Editor’s Note: This story has changed from its original version to correct John Green’s title. Green is president of Founders Brewing Co.